Huge 3Q for CMA CGM

Tuesday, November 20, 2012

The liner carrier CMA CGM said Tuesday it had $617 million in operating profits in the third quarter of 2012, while revenue increased 9 percent year-on-year to $4.2 billion.
For comparison, the line sustained a $224 million operating loss in the comparable quarter of 2011. CMA CGM, which is privately held, releases quarterly operational profit in terms of earnings before interest, tax, deprecation and amortization (EBITDA), whereas American Shipper typically reports operational profits in terms of earnings before tax and interest (EBIT).
Third quarter volume was 2.7 million TEUs, compared to 2.6 million TEUs in the third quarter of 2011.
The carrier said it managed a 7.7 percent year-on-year reduction in operating expenditures and a 6 percent increase in freight rates helped the line to an industry-best performance during the quarter.
Also aiding the situation was a positive demand environment.
“The market has been good,” Michel Sirat, CMA CGM’s chief financial officer, said during a conference call Tuesday. “Volumes are up this quarter and price up as well.”
He said the Asia-Europe trade has been weaker and more volatile than the line’s other trades.
Sirat noted CMA CGM’s operating margin during the quarter – 12.8 percent – was largely due to a decrease in bunker costs and chartering costs. Bunker consumption fell 15 percent.
The line said it has slashed $550 million in operating costs thus far this year, representing about 5 percent of the company’s total costs.
The line’s gross debt sits at $5.7 billion, Sirat said, with $4.6 billion owed to banks and the remainder tied up in bonds. He said CMA CGM is currently negotiating with lenders to reschedule some of the debt due t mature in 2013 back to 2014. Between $600 million and $700 million is due to mature in 2013.
Sirat said the line is in a comfortable liquidity position thanks to its strong operational performance. He said a planned sale of some of the company’s terminal assets is on course to be completed in January, but wouldn’t disclose any details about the buyers of the assets.
Year-to-date, the line has earned net profits of $310 million, boosted mostly by the $371 million in net profits during the third quarter. The line expects to end the year with a “substantial profit,” though Sirat admitted on the call the word substantial is subject to interpretation. Either way, CMA CGM expects the fourth quarter to be profitable, though less so than the third quarter.
As for an outlook for 2013, Sirat said the CMA CGM is cautiously optimistic.
“We’ don’t expect demand to be much different than 2012,” he said. "What we have noticed is that in 2012, the industry has been more proactive about capacity. We expect this attitude to continue going forward. We expect supply-demand to be fragile but well-managed.”
The line will take delivery next year of the two remaining 16,000-TEU sister ships of its recently launched Marco Polo, the biggest container vessels in the world at present. - Eric Johnson